Dallas, Taxas -- (SBWire) -- 10/12/2010 -- The outlook for the infrastructure sector in Saudi Arabia is improving, with a slew of project announcements in the first months of 2010. Similarly a number of large-scale utilities projects tendered out in the second half of 2009 have also seen movement in early 2010, adding to confidence in the sector. This has helped to boost growth forecasts for the construction sector again with BMI predicting a yearon- year (y-o-y) increase in 2010 of 6.79%, an improvement of nearly one point on last quarter when it was 5.89%. The industry is estimated to be valued at US$22.48bn for 2010. Growth will continue over the forecast period, but at a lower rate averaging just 2.73% up to 2014 when the industry value will be US$28.09bn.
Major project announcements continued apace this quarter with power projects and airports dominating the news. In April 2010, Saudi Arabia announced plans to spend US$80bn increasing its power generation capacity and transmission network. The deputy minister for electricity predicted that the country's power generation capacity will increase by 20,000 megawatts (MW) in the next decade. Projects such as a 1,730MW independent power project (IPP) awarded to a consortium led by France's GDF Suez are expected to drive this.
The airport sector remained buoyant, with the announcement that the first privately owned airport in Saudi Arabia is to be ready by 2014. The General Authority of Civil Aviation (GACA) expects to float a tender in May 2010 for the airport. The build, operate and transfer (BOT) contract for the project will be awarded by the end of 2010 or in the beginning of 2011. The construction of the airport is estimated to cost SAR7-8bn (US$1.87-2.13bn). The airport will be able to handle 8mn passengers per year. Saudi Arabia’s business environment remained near the top f the regional ranking; however, it lost one place falling behind Bahrain this quarter with a score of 58.4 to place it in fourth place. In terms of project finance ratings, the country still has room for improvement ranking sixth place this quarter with a score of 66.2. This is a result of weak contract enforceability scores indicating a lack of confidence that contracts are legally binding. Tied to this the PPP legal framework and corruption need some work to become more transparent.
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ReportsandReports – Saudi Arabia Infrastructure Report Q4 2010